HEALTHPLAN MAGAZINE

Non-Resident Taxes In Spain Expat Tips

Many foreigners own property here in Spain and use the property either as a source of rental income or as a holiday home. What many fail to realise though is that even though they may not be a full time resident here in Spain, they are still liable to pay certain taxes each year to the Spanish tax authorities on property they own and other assets and investments here.

Firstly though, it's important to establish whether you are resident or non-resident as this will determine the taxes and amounts you are liable to pay.

According to Spanish law, if any of the following criteria apply to you, then you will most likely be classed as tax resident in Spain.

  • You spend more than 183 days in a calendar year in Spanish territory.
  • Your centre of financial interests is located in Spain.
  • Your spouse and/or underage children reside in Spain.

If you own a property or other assets here in Spain and you are a non-resident (you do not fit the criteria above), then there are a number of taxes that you ay be liable to pay. These include:-

I.B.I Tax

Levied by the town hall, this is a form of council tax that each property owner has to pay each year. I.B.I or Impuesto Sobre Bienes Inmuebles is based on the rateable value of the property also known as the Valor Cadastral. I.B.I is paid either directly to your town hall or to one of the SUMA offices if living in certain areas of the country.

The rate of tax is dependent on the region, but ranges between 0.4 to 1.1% of the Cadastral rateable value.

Further info on I.B.I can found at

www.healthplanspain.com/blog/expat-tips/125-what-is-ibi-tax-in-spain.html

NRIIT - Non-Resident Imputed Income Tax

If you own a property here in Spain and are a non-resident you will still have to pay NRIIT or Non-Resident Imputed Income Tax on it each year.

The Spanish tax authorities take the view that even though you are a non-resident and you say you are not renting it out, you are most likely deriving something from it in terms of benefit in kind. Irrespective as to whether that's true or not, you are still liable to pay NRIIT tax each year.

If you decide to sell the property, the tax authorities will check to make sure that the NRIIT payments are up to date. If not, the tax office will take the outstanding amount from the 3% that is withheld by the buyer and paid into the tax office on completion of the sale of the property.

NRIIT is collected on the 31st of December each year for the previous year.

NRIT - Non-Resident Income Tax

As well as NRIIT, if you own a property and rent it out you will also need to pay NRIT or Non-Resident Income Tax.

Whether the property is rented out long or short-term, you will still need to pay quarterly NRIT payments for the periods that the property is not being rented out. So if you rent the property out for six months of the year, you will need to pay NRIT on 6 months and NRIIT on the other six months. A win win for the Spanish tax man.

Due to the double taxation treaty between the UK and Spain, property owners are only obliged to pay property taxes to the country that the real estate is located in. So if you live in the UK and own a villa on the Costa del Sol, property taxes on that property only need to be paid to the Spanish tax authorities.

NRIT tax is usually paid on the following dates each quarter.

  • 20th of April
  • 20th of July
  • 20th of October
  • 20th of January

What happens if I do not pay these taxes?

Quite simply, you could be in a lot of trouble with the tax man. There are a number of ways in which the tax man can check as to whether you are renting a property or not such as cross referencing the name on the title deed to the name on the utility company account and/or monitoring the electricity consumption of the property.

Not paying these taxes may lead to:-

  • The debt being held against the property up until the point it is either sold or bequeathed.
  • You will not be able to change the name on the title deed until the debt is paid.
  • Your bank account may be embargoed.
  • You may have to pay interest as a penalty on the debt.

You will usually be informed in writing by the Spanish tax authorities if you do owe taxes. This is why it is important that you have some form of fiscal representative permanently residing in Spain to deal with such notifications and to look after your financial interests while you are away.

Capital Gains Tax

If you are a non-resident you will need to pay capital gains tax here in Spain for any properties, investments or other assets that are located here.

Capital gains is currently based on the difference between the original purchase price (less expenses, taxes and other costs) and the transfer/sale price (less taxes, expenses and other costs).

If you are a non-resident and own a property here, 3% of the purchase price has to be paid by the buyer to the Spanish tax authorities within 30 days (Modelo form 211) of the sale to cover any potential capital gains or outstanding NRIT/NRIIT tax. If the outstanding amount is less than the 3%, the difference will be reimbursed to the vendor.

The vendor must file a Spanish tax return on the transaction within three months of the sale (Form Modelo 212) before any repayment can be made.

The current rate of capital gains tax for non-residents is 19% for 2018.

You can read more on capital gains tax at

www.healthplanspain.com/blog/expat-tips/461-capital-gains-tax-in-spain.html

Inheritance Tax

Spanish Inheritance tax or Impuesto de Sucesiones y Donaciones/ISD has to paid if you inherit a property or other asset in Spain. It is paid regardless as to whether you are resident or non-resident.

Inheritance tax usually has to be paid within 6 months of the death with fines of between 5%-20% after 6 months if not paid. You may request a one time extension of this period up to 6 months, which would give you 12 months to settle any outstanding taxes due.

Although making a will will not help you to avoid inheritance tax in Spain, it will make it a lot easier for your heirs to transfer any Spanish assets easily and to avoid any extra stress and in some cases fines and penalties.

There are tax allowances for beneficiaries and these vary between the different regions. For example in Andalucia you may inherit up to €1,000,000 tax free per inheritor.

In some autonomous communities such as Communidad Valenciana, Balearics, Cataluña, Murcia and Madrid up to 99% may be waived although this currently only applies to residents.

You can read further information about Spanish inheritance tax via our other page at

www.healthplanspain.com/blog/expat-tips/78-spanish-inheritance-tax-explained.html

Wealth Tax

Although the wealth tax was implemented in 2011 as a temporary measure, it is still going strong today and although it mainly affects those resident in Spain, it does also come into play for non-residents as well.

Wealth tax is measured on the assets that you own in Spain rather than your income and includes things such as property, savings, investments, art, jewellery, furniture, cars and boats etc.

Spanish wealth tax will only affect you if you have assets in Spain worth over €700,000 per person. The rate you pay will depend on the area in which your assets are located and can range from between 0.2% to 3.5%.

Like many taxes in Spain, it is recommended that you speak with a professional tax advisor to gain a better insight into your liabilities in Spain and how to efficiently manage for tax purposes any investments and assets you may have here.